Alan W. Dowd is a Senior Fellow with the American Security Council Foundation, where he writes on the full range of topics relating to national defense, foreign policy and international security. Dowd’s commentaries and essays have appeared in Policy Review, Parameters, Military Officer, The American Legion Magazine, The Journal of Diplomacy and International Relations, The Claremont Review of Books, World Politics Review, The Wall Street Journal Europe, The Jerusalem Post, The Financial Times Deutschland, The Washington Times, The Baltimore Sun, The Washington Examiner, The Detroit News, The Sacramento Bee, The Vancouver Sun, The National Post, The Landing Zone, Current, The World & I, The American Enterprise, Fraser Forum, American Outlook, The American and the online editions of Weekly Standard, National Review and American Interest. Beyond his work in opinion journalism, Dowd has served as an adjunct professor and university lecturer; congressional aide; and administrator, researcher and writer at leading think tanks, including the Hudson Institute, Sagamore Institute and Fraser Institute. An award-winning writer, Dowd has been interviewed by Fox News Channel, Cox News Service, The Washington Times, The National Post, the Australian Broadcasting Corporation and numerous radio programs across North America. In addition, his work has been quoted by and/or reprinted in The Guardian, CBS News, BBC News and the Council on Foreign Relations. Dowd holds degrees from Butler University and Indiana University. Follow him at twitter.com/alanwdowd.

ASCF News

Scott Tilley is a Senior Fellow at the American Security Council Foundation, where he writes the “Technical Power” column, focusing on the societal and national security implications of advanced technology in cybersecurity, space, and foreign relations.

He is an emeritus professor at the Florida Institute of Technology. Previously, he was with the University of California, Riverside, Carnegie Mellon University’s Software Engineering Institute, and IBM. His research and teaching were in the areas of computer science, software & systems engineering, educational technology, the design of communication, and business information systems.

He is president and founder of the Center for Technology & Society, president and co-founder of Big Data Florida, past president of INCOSE Space Coast, and a Space Coast Writers’ Guild Fellow.

He has authored over 150 academic papers and has published 28 books (technical and non-technical), most recently Systems Analysis & Design (Cengage, 2020), SPACE (Anthology Alliance, 2019), and Technical Justice (CTS Press, 2019). He wrote the “Technology Today” column for FLORIDA TODAY from 2010 to 2018.

He is a popular public speaker, having delivered numerous keynote presentations and “Tech Talks” for a general audience. Recent examples include the role of big data in the space program, a four-part series on machine learning, and a four-part series on fake news.

He holds a Ph.D. in computer science from the University of Victoria (1995).

Contact him at stilley@cts.today.

Economic Flu Stalks Latin America

Tuesday, March 17, 2020

Categories: ASCF News Emerging Threats Economic Security

Comments: 0

If it’s true the novel coronavirus doesn’t like warm weather, it could explain why Latin America has yet to report a large outbreak. Much of the region isn’t tropical, but most of the temperate zones in the Northern Hemisphere have mild winters, and in many places spring is already arriving.

Too bad the annual thaw can’t save the Americas from the economic consequences of a pandemic, exacerbated by a decade of easy money. The meltdown in global stock markets suggests something deeper than a corona recession is at work. And as a version of the old saw goes, when the U.S. gets sick, Latin America gets a lot sicker.

The explanation for the slowdown in the real economy is Covid-19, the disease caused by the novel coronavirus. Transmission of the illness isn’t well understood, the severity of individual cases varies greatly, and public-health authorities are having trouble getting a grip on how many people have been infected.

The virus killed a 34-year-old doctor in Wuhan, China, who attempted to warn his country about it. That authorities in Beijing initially tried to silence him raises questions about China’s claim that it has quickly contained the disease’s spread. Transparency isn’t one of the Communist Party’s strengths.

Yet business investment in the U.S. was already trending down before the virus hit, and we’re overdue for a recession. Even the pandemic doesn’t explain the severity of the stock-market downdraft last week. Yes, there is the madness of crowds, but that too is an unsatisfying narrative. Something else is going on.

That something is fear about U.S. financial-system stability. The immediate concern for central banks is a liquidity squeeze that paralyzes lending and brings down healthy institutions. Walter Bagehot’s sage advice in his 1873 book, “Lombard Street,” was that to avoid panics, central banks, as lenders of last resort, need to make liquidity freely available to solvent institutions, but at a premium.

On Thursday the Federal Reserve announced $1.5 trillion in short-term funding to keep financial markets from seizing up, though there’s no penalty rate. A shortage of dollars in Asia last week hit Japanese and Korean bonds. Access to swap lines should alleviate some of that pressure, and Mexico’s central bank also has swap privileges at the Fed. Other central banks in the region don’t, and they will feel the pinch.

A greater concern is whether the U.S. financial system is facing a solvency crisis, i.e., too many loans going bad and pulling one or more banks under. The Fed doesn’t reassure with its announcement Sunday that it will not only cut its benchmark interest rate to near zero but also buy $700 billion in Treasury and mortgage-backed securities.

The purchases are ostensibly to ensure “the flow of credit.” But this “quantitative easing” was last seen after the 2008 financial crisis, when poorly managed financial institutions were desperate to avoid insolvency and repair their balance sheets.

The worry that banks might be in trouble again is reflected in markets. Bank stocks rallied Friday after the Fed promised to intervene, but bank equity prices were diving more than the broad indexes most of the week. On Wednesday the Journal reported that “the cost of insuring against default on Citigroup debt for five years rose to $115,000 annually from $40,000 this week, according to FactSet.” The price remained “well below the panicked pricing seen in 2008,” but the surge indicated something amiss.

The benign explanation is an expectation that bank profits will underperform as interest rates swoon. But the quality of loan portfolios is also a consideration. So is the adequacy of the stress testing banks have faced since the last crisis.

In an April 2013 speech in Basel, Switzerland, Thomas Hoenig, then vice chairman of the Federal Deposit Insurance Corp., warned deposit insurers that the practice of risk-weighting assets was creating an “illusion that banking organizations have adequate capital to absorb unexpected losses.” If that’s true it would go a long way in explaining fear about banks’ exposure to this downturn. There are also the uncertainties of the humongous and nontransparent interest-rate swap market, where major banks are counterparties to each other.

If the financial system is still shaky after a decade of Fed subsidies, it implies that absurdly low interest rates and quantitative easing have been counterproductive. Grandma has been eating cat food while the banks remain fragile. This is bad for those of us who prefer liberty to socialism.

Former Salvadoran Finance Minister Manuel Hinds writes in his forthcoming book, “Our 1776 Moment: A Defense of Liberal Democracy,” that the damage from the bailout in 2008 went “much beyond economic losses. The crisis and its solution destroyed the faith that people had put in capitalism and liberal democracy.” Enter Bernie Sanders.

The U.S. may yet fight off a lurch to the left. But the ripple effect in Latin America, where collectivists perpetually rail against markets, is worrisome.

Photo: Workers disinfect a bus station in Bogota, Colombia, March 13.

PHOTO: FERNANDO VERGARA/ASSOCIATED PRESS

Link: https://www.wsj.com/articles/economic-flu-stalks-latin-america-11584313895

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